Why consider the Debt Arrangement Scheme?

19th September 2011

When researching ways to deal with debts, residents of Scotland are likely to be able to locate an awful lot of information about Scottish trust deeds. Perhaps because it’s new, or perhaps because commercial involvement in the scheme is relatively recent, the amount of online resource that cover the Debt Arrangement Scheme is much less significant. In this article we will cover some of the reasons why the Debt Arrangement Scheme might be a debt solution worthy of your consideration:

You wish to repay your debts in full.
Many people would like to fully repay their debts and are frustrated to find that their finances will not allow it. The Debt Arrangement Scheme will ensure that your debts are fully repaid over time once it has been accepted and established.

You could pay back your debts if only the interest would stop mounting up.
A debt management plan may encourage creditors to cease charging interest but it’s not guaranteed that this will happen (or continue). By contrast, the Debt Arrangement Scheme (once accepted) will stop interest being added to the unsecured debts included in the arrangement. This will continue provided that you carry on making the agreed payments into your Debt Arrangement Scheme.

A trust deed would pose a threat to your home.
In sequestration or a protected trust deed any assets that you own will “vest” in your Trustee. That means you’ll either need to sell them or find another way to release an amount equivalent to the value of them. The most common example is equity in a home, though cars worth more than £3000 are another possible issue. For many people it is simply impossible to get hold of this cash, but retaining the asset is a priority for them. The Debt Arrangement Scheme takes into account surplus income only; assets do not form part of the equation.

You cannot risk legal action from your creditors.
Formal debt solutions such as a Scottish trust deed or the Debt Arrangement Scheme provide protection from legal action taken by your unsecured creditors provided you abide by the terms of the agreement you entered into. The same isn’t true of informal debt solutions like a debt management plan. Some people have contractual employment concerns about legal debt recovery action being taken against them, something that applies in particular to some professionals in the legal, accountancy, and financial services industry.

Insolvency (trust deed or sequestration) would threaten your job. Some people have contractual or regulatory restrictions connected to “insolvency”. In some circumstances the Debt Arrangement Scheme (which clearly is not bankruptcy) may not cause the same issues, though checks with the appropriate employer or regulator should be made first.

Of course an article such as this one can only cover so much ground. Whatever debt solution you may be considering, it’s wise to seek professional and varied debt advice in advance of making any final decisions. The Debt Arrangement Scheme offers benefits and protections that may be valuable to some people, but others will be better served by the usually time-limited nature of a trust deed or sequestration.